Why the Tail Should Not Wag the Dog:
Integrating the Deployment of Information and Communication
Technologies (ICT) in Service Innovation and Delivery
Martin Fellenz, School of Business, Trinity College Dublin
Email: Martin.Fellenz@tcd.ie
and
Mairead Brady, School of Business, Trinity College Dublin
Email: Mairead.Brady@tcd.ie
Irish Academy of Management 2006. - Competitive Paper
Services are fast overtaking products as the basis for the predominant
economic model for companies and countries. Successful service organisations
tend to employ a particular service logic that combines transactional and
relational aspects. In the context of this service logic, there has been a lack of
debate on the most appropriate role for Information and Communication
Technology (ICT). In particular the question of the overall impact of increasing
deployment of ICT from both organisational and customer perspectives has not
been sufficiently explored. Does ICT add value to service marketing
considering that one of the major elements of service marketing is the
interpersonal relationship which is now mediated in many cases through ICT?
Within a review of the extant literature in this area we suggest that ICT needs to
be subservient to the creation of value for the customer. Decisions on how to
use ICT are too often driven by what is technologically possible rather then
what adds value to the service partners. In this paper we argue that it is more
important to focus on achieving the full potential of the service encounter and
thus ultimately the full relationship value than to concentrate on realizing the full
potential of a particular technology.
1
This paper reviews the service logic from a relational perspective. It then links
to the automational nature of much of ICT within organisations. This is further
related to a review of how ICT moves aspect of the relational dimensions of
services to a transactional or automational level. We suggest that technologist
need to understand marketing and that marketers need to be cognisant of their
own technological requirements and to be able to engage in meaningful
dialogue with technologists in order to maximise the economic and relational
value to be gained from ICT. There are thus three orientations that need to be
considered jointly: the economic, the technological, and the marketing
perspective. These three different views all require attention, but none can
deliver the full value required in competitive service markets. Thus, the three
sets of objectives require an arbitrator that can integrate technological potential
with customer and service delivery requirements to maximise the business
value of the firm’s market offerings. We believe that marketers are uniquely
placed to fill this important role.
The Growth in Services: A 21st Century Phenomenon
Services are fast overtaking products as the basis for the predominant
economic model for companies and countries. The success of this model rests
in large part on the underlying logic that service organisations employ. This has
enabled the service sector to outpace product and manufacturing oriented
sectors and replace them as the motor of economic growth. Services account
for 75% of the GDP in the United States and 70% of the aggregate production
and employment in OECD nations (OECD, 2005). Service science is seen as
the next frontier discipline after computer and information science (Berry et al.,
2006).
Vargo and Lusch (2004) suggest that the bases for economic exchange should
focus on the provision of services rather than the traditional product focus.
They argue that marketing academics have always viewed service as a subset
of product marketing and from the perspective of how they differ from products,
with limited empirical support for these views. They further suggest that the
characteristics and therefore the paradigm from which much of the limited
discussion of services flows are flawed. As more and more product based
2
companies like IBM, Pitney Bowes and Fujitsu garner so much of their
profitability from the service aspects of their business (Neu and Brown, 2000)
we need to refocus our efforts on how we study services and how customer
avail of services in the networked economy. As all products become services
and no difference exist between marketing in general and service marketing,
service thinking is becoming the dominant thinking (Stauss, 2005). In this
context we need to ensure that our conceptual foundations are both appropriate
and empirically grounded; in short, we need to make sure that we understand
contemporary services. The dominant logic of service thinking proposes that
“value is created and perceived by the customer. The function of marketing is to
develop offers in co-production with customers – whereby customers are
presented with attractive value propositions and are supported in the creation of
value” (Stauss, 2005:220). The concept of co-production, which is at the heart
of the service logic, thus places the relational aspects of the organisationcustomer interface at the heart of the value creation model underlying the
economic activity of the firm. It replaces a product oriented logic that primarily
focuses on the transactional aspects of the interface. “In this service-dominated
paradigm relevant
concepts
from service
thinking-such
as ‘customer
integration’ ‘co-production’ and ‘relationships’ – thus becomes of central
importance. The spotlight is on the customers themselves, interaction with
these customers and the integration of customers in the production process. In
this paradigm any contact with customers is seen as being relational.” (Stauss,
2005:220).
ICT Deployment in Service
If organisations fully embrace this service logic, what are the implications for
the ICT currently in use in their customer offerings, and how can ICT most
usefully be deployed in this new customer-centric view? In tandem with the
growth in services there has been a phenomenal rise in the adoption of ICT by
a wide variety of companies within both product and service domains. Given
that services by their nature process large amount of information, they can
benefit from the appropriate deployment of a supporting ICT infrastructure.
Many businesses beyond the spheres of traditional service activities such as
3
banking, insurance and travel are also becoming heavily reliant on ICT. Overall,
the dominant users of ICT can be found in the service sector (Meyronin, 2004).
The growth in self-service technologies and co-production of services heralds
new and interesting developments at the customer interface (Howard and
Worboys, 2003; Meuter et al., 1998, 2000). Academics have observed the
growing popularity of self-service technologies and have commented on both
the positive and negative consumer perception of same (Howard and Worboys,
2003). Meuter and her colleagues’ (2000) empirical study confirms that selfservice technology is accepted and growing in popularity particularly when
handled as a customer support rather than a cost saving initiative. She did note
that only 5% of customers wanted self-service through all the stages of the
decision making process but that they would use self-service as long as a
human element was available if needed. It appears that the scope for deploying
ICTs that support such self-service based customer interfaces is tremendous.
The obvious attraction for service providers is the potential for technologybased efficiency and resulting cost savings. An important challenge for service
providers, however, is to not prioritize the technological or economical aspects
to the detriment of the value ultimately delivered to their customers.
How far will the use of ICT in the service industry progress – will we see the full
demise of the face-to-face encounter? Is the quest for economic and
productivity gains through automating service detrimental to human relations?
A study by Brady et al. (2002) showed that relationship-orientated companies
were more proficient users of ICT than transaction-orientated companies. While
this seems initially counterintuitive because the former companies deal more
intensively with customers, much of this contact is now being mediated through
ICT. Is there a loss of value with a rise in ICT, a loss of the interpersonal
relationship with the customer? Within business–to-business relationships the
use of internet-based systems decreases the nature and quality of information
shared by the participants and reduces the frequency of their interactions.
(Schultz and Orlikowski, 2004) Meyronin (2004) suggest that automation
contributes to the building of an informational wall. He asks whether the
productivity gains from automation compensate for the losses in terms of value
4
and differentiation so often inherent in the deployment of automating
technologies. How can ICT based services be distinguish in the eyes of the
customer? Does electronic anonymity (Meyronin, 2004) support the service
environment?
Service innovation through ICT has often seen the service moved to a
transactional rather than a relational focus. For example, a relational dominant
marketing practice like book selling can be transformed by placing an ICTbased interface between the customer and the supplier. Now the relational
aspects that previously may have been a central part of the customer
experience have been incorporated in a transactionally orientated interaction.
Service provision becomes skewed towards what the ICT can deliver. As ICT
does not enable the relational as much as the transactional, part of the value of
the service can be lost as a result. ICT’s electronic mediation ‘tends to
impoverish service relations, insomuch as the technological interface can by no
means replace the wealth of human interactions on which the creation of value
and the differentiation of services are based’. (Meyronin, 2004:216)
Service in an Automated Environment
The logic of how ICT is assimilated into organisations follows Nolan’s (1973)
Stage Theory through stages of data processing, personal computing and
network,
or
in
Zuboff’s
(1988)
terms
automation,
information
and
transformation. Thus the fact that the first wave of ICT assimilations has
produced efficiency gains rather than relational improvements is acceptable but
highlights our need to move towards what Nolan called the network era. Brady
and her colleagues (2002) report that ICT used by marketers followed the
Stages Theory Approach and was predominantly automational in focus, i.e., it
is used to automate previously manual tasks. This suggests that ICT in the
service domain is replacing the human interface, thus turning the customer into
a self-service customer and mediating the relationship through ICT. There are
obvious effects on the relationship as the buyer/seller roles become blurred and
the understanding of each other is ICT mediated and is therefore often more
limited.
5
Prahalad and Ramaswamy (2004:7) suggest that in a service era defined by
co-creation ‘we need to challenge the traditional, distinct roles of both the
consumer and the company and examine the impact of a convergence of the
roles of production and consumption’. They suggest that the current system of
value creation, even when shared with the customer through self-service, is
product centric, service centric and company centric rather than customer
centric. If we wish to move away from a technologist view then a co-creation
view may offer a solution. Prahalad and Ramaswamy offer dialogue,
transparency, access and risk benefits as building blocks of interactions for the
co-creation of value. Many of these are driven by ubiquitous connectivity. Much
of co-creation has had a company focus, from the customer as innovator to
mass customisation, which suits the company rather than real customer centric
focus on co-creation. Now is the time to embrace customer centric ICT.
Does ICT enable the relational as much as the transactional?
What are the implications for the service encounter when the customer is a selfservice
customer?
Who
is
managing
the
interpersonal
relationship?
Contemporary marketing practice views marketing along a transactional to
relational perspective trajectory (see table below). It must be noted that the
categories are neither mutually exclusive nor necessarily lie on a single
dimension. Coviello and colleagues (2002) have empirically confirmed a
pluralism of approaches in that marketers have a dominant orientation but
practice all other forms too.
Table 1: Marketing Classified by Relational Exchange Dimensions
Transactional
Relationship Perspective
perspective
Transaction
Database
Interaction
Marketing
Marketing
Marketing
Network Marketing
Source: Adapted from Coviello et al., 1997
It can be suggested that the more relational a company’s marketing practice is,
the more they adhere to implicit service logic. Does ICT reduce the relational
encounter back to a transactional encounter? Within services most text books
6
and authors will discuss the importance of the interpersonal. As Brown (2000:
62) notes ‘the ability to obtain and consume services without interacting with a
human provider challenges much of our existing knowledge’. The emphasis on
service is also on the life time value or the long term nature of the service. From
a transactional perspective the emphasis is on arms length, discrete, once-off,
relationshipless interactions. For example within the banking system the
introduction of ICT along the value chain has resulted in the automation or
transactional focus of much of what was traditional face-to-face or interpersonal
banking. Does this add value to the relationship? The reality is that the high net
worth customers who the organisation wants a relationship with are now
increasingly served through low-value adding ICT service encounters. This
negates the banks ability to upsell to them or to develop this relationship further
(see figure 1 below). The company has encouraged, and the customer has now
accepted, that the service encounter will be transactional, in that it will be arms
length, discrete and so on. The relational dimensions have been pushed back
through decisions on ICT mediated interfaces. Even though this is more
efficient for the bank this raises important questions: Does this add value for the
customer? And how can the bank differentiate themselves from competitors
when their products and their service delivery is standardised and this
transactional approach cannot provide relationship-enhancing, personalised
interactions?
7
Figure 1: Multi-Channel: Value Add of Sale Versus Cost Per Transaction.
As an aside, the growing popularity of multiple channels has been virtually
unexplored in the existing literature with an absence of guidelines regarding the
design of multiple channels. A recent study by Coelho and Easingwood (2005)
suggest that customer heterogeneity, customer volatility and environment
conflict influence the choice of multiple rather than single channels. We would
suggest that the availability of the technology has driven much of the growth
without the corresponding understanding of the implications. This view is
supported by evidence (Coelho and Easingwood, 2005; 208) that multiple
channels are often designed in an ‘embarrassingly unscientific’ manner. This
research lacks a technological orientation which would have added further
weight to our suggestion.
The Human Dimension of Co-creation
Services ultimately are based on information and/or people. ICT can
legitimately cover the information aspect but what is the impact of the people
aspect? Services traditionally were seen as an opportunity for the joint creation
of value. Meyronin (2004:223) notes that ‘by replacing the wealth of human
8
interaction with the strict conformity of (ICT) infomediation, service companies
are inclined to forget the importance of customer participation in the servuction
process, their role as co-producers of a service, co-innovations and the sole
evaluators of the quality of the service given. Losing the wealth of human
contact and the inherent potential of any encounters in a servuction area in
favour of infomediation seems to counter-act an increase in created value’
According to Meyronin (2004) the people elements are: listening to and
understanding needs; personalisation of the service; handling crisis situations
and socialisation impacts. Meyronin (2004:220) suggests that ‘by considerably
diminishing the control a service company has over the service relation,
infomediation tends to cancel out the positive effects related to ‘handling
people’ to the service’s capacity to co-product value and create differentiations
with the customer’. De Wulf et al. (2001) note that service firms must arbitrate
between the benefits of the automation of the service and the advantages
inherent in the human interaction that result from direct contact with the
customer.
What are the implications for consumers? Meyronin (2004) suggests that the
consumer loses through increased need for participation, rise in the perception
of risk, loss of socialisation, and lack of flexibility in the relationship with the
company. Bitner et al. (2000) cite the advantages to using ICT self-service
technologies as availability in case of emergencies; ease of use; efficiency in
terms of time and money; and temporal and geographical availability. Prahalad
and Ramaswany (2000) view consumers as co-producers of value and this can
be lost in the race for automation for the sake of efficiencies. Services have
always viewed the co-producer aspect as important centring it under the
inseparability role. Services production and consumption is linked to concepts
of interaction and the service encounter: it is the ‘moments of truth’ when the
customer interacts with the company. Co-production moves work from the
provider to the consumer as the consumer becomes a partial employee
(Gummesson, 1998).
ICT can actually obliterate the twin constraints of
services, notably perishability and inseparability, and can separate service
provider from customer in terms of both time and space (Lovelock and
9
Gummesson,
2004:20).
‘Technology
has
transformed
many
formerly
inseparable services into services that can be consumed at any time or place’.
(Berry et al., 2006;57). The implications of this for co-creation are not yet fully
understood.
As Meyronin (2004) asks, what are the losses in terms of creation of value and
differentiation and the productivity gains? ICT is used to solve or resolve the
problems that occur at the human interface. ‘Given that large number of service
quality problems which result form incidents that occur between customers and
staff, service industries use new technologies more and more in order to reduce
or suppress customer contact. Thus telephone conversations have replaced
face to face contact and human services are replaced by self- service which
often depends on the use of computers and automation.’ (Lovelock and Lapert,
1999:34) Bitner et al., (2000) shows that many customers prefer ICT based
services because they are disappointed with the human based services.
The Marketing Perspective
There are many challenges for companies to match the level of ICT to the
marketing and customer requirement. According to Brady (2006) there are over
100 ICTs available to marketing divided into information and interaction ICTs
(see appendix 1). From an interaction perspective customers have multimethod options of contact and communication and from an information
perspective marketing managers have a myriad of ICTs providing them with an
avalanche of information to be analysed, manipulated and managed.
Our
worry is that marketers do not have all the skills needed to manage the
complex issues arising from the current ICT, let alone the more innovative and
complex ones currently in development. How much ICT, to whom, when and
where must be considered from several perspectives before the most
appropriate answers can be found.
A particular challenge is the difficulty of predicting the actual impact of ICT on
the resulting service proposition for the customer. As the value of offered
services is in part created by the customer, the impact of ICT on value cocreation and on the customer’s subjective service experience and evaluation is
10
difficult if not impossible to predict. Meyronin (2004:221) provides the example
of a bank which ‘in its endeavours to become multi-channel […] has multiplied
sources of dissatisfaction, frustration and concern from those who did not
purposefully choose ICT based services.’ Is increased ICT increasing
satisfaction and value? Meuter and colleagues (2000) note that ‘by increasingly
enforcing the use of info-mediation beyond the "technophiles" segment (who
have the facilities), service companies are leaving themselves wide open to
likely disappointments from those customers who do not have access to and/or
who do not like such servuction methods”. An alternative view is that there are
segments which are ICT literate and demanding, where customers are more
technology aware and in that case it could be marketing which is lagging far
behind their more technology savvy customers (Spero and Stone, 2004).
According to Ranchhod, (2004: 269), many ‘current IT systems are not fluid and
dynamic enough to cope with customers who are ubiquitous and can contact
companies through mail, mobiles and the internet’. This is particular true for the
younger generation. Spero and Stone describe this group as living in the digital
environment where ‘patterns of adaptation mushroom and then wither away
quickly, at a pace which is hard to understand, while new technologies are
picked up quickly, provided that they observe the basic rules of economy (not
too expensive), adaptability (quick, easy and cheap to adapt to user needs),
technical
pervasiveness
(you
can
use
them
anywhere)
and
market
pervasiveness (lots of people using them and therefore easy to establish your
own network of connection)’. (2004:155)
A key point made by Mitchell (2002) is that no matter how advanced new
technologies become, they will never be completely efficient without the input of
the consumer. “They depend on customers ‘opting in’ rather than merely acting
as passive targets,…making marketing a joint, cooperative process” (Mitchell
2002:77). In short, in the information age customers have a role in shaping and
directing the interaction between marketing and ICTs. It is the marketers’ role to
make the customers’ voice heard in this process.
11
Towards a Model for Deployment of ICT within the Services Logic
Within this discussion we suggest a customer centric ICT deployment model
that is more fully aligned with the service logic. It suggests that technologist,
marketers and business managers must unite towards a customer centric
focus.
1) Technologists’ Perspective: Technologist drive towards what is
technologically possible
2) Economic Perspective: Managers’ drive towards what is profitable
3) Marketing/Customer Centric Perspective; Marketers drive towards
maximising the value for the customer and the company.
Recognising the challenge of integrating these three orientations is only the first
step towards a more customer-centric deployment of ICT. A second step is to
recognise and address the challenge of enabling marketers to successfully fill
the arbitration role and coordinate the three different perspectives we have
outlined above. There are a number of aspects to this, including the difficulty of
equipping them with the relevant skill-set, and the challenge of enabling them
through appropriate organisational arrangements.
In fact, the challenge for the most appropriate deployment of ICT must be
integrated into a holistic understanding of at least these three fundamentally
different orientations. Specifically, the technologists’ drive to apply cutting edge
knowledge, to push the boundaries of what is technologically possible, must be
checked both by the business logic that requires short-term profitability and
longer term economic viability and sustainability, and the marketing logic that
places customer needs and customer value at the heart of matters. These three
different orientations all require attention, but none can on its own deliver the full
value required in competitive service markets. Thus, the three sets of objectives
require an arbitrator that can integrate technological potential with customer and
service delivery requirements to maximise the business value of the firm’s market
offerings. We believe that marketers are uniquely placed to fill this important role.
12
Diagrammatically, companies have the choice of one or more perspectives from
figure 2 below. Our contention is that it should not be any single or any pairing of
perspectives, but that all three need to be aligned facing the customer centric
model of ICT assimilation. So two out of three as the current focus within
companies needs to be replaced by all three with the requiring organisational,
managerial and skill set changes.
Figure 2 Deploying ICT within the Service Logic
Marketing
Perspective
Technologist
Perspective
Economic
Perspective
The three sets of objectives require marketers to act as arbitrators that (a) can
understand the individual perspectives and can constructively relate to the
respective sets of specialists; (b) can integrate technological potential with
customer and service delivery requirements to maximise the business value of
the firm’s market offerings; and (c) can achieve both strong and sustainable
relationships with customers that help differentiation, add value in the service
co-creation, and provide a conduit that integrates customers directly into the
development of future services and service delivery approaches.
We must reinforce the point that the coordination of the different perspectives
identified above is not a fixed sum game. Instead we argue that successful
arbitration among these perspectives must help to move towards exploring and
13
increasing the value available for both service provider and customer. In short,
marketers must help pave the way for ICT to help both parties. This can only be
achieved when the economic demands of the service provider have as central
a role in the deployment of ICT in the service delivery as have the customers’
expectation and evaluations. And lastly, both of these perspectives need to be
integrated with what the technologists can actually develop and implement.
The tripartite view we propose here places the joint maximisation of the value to
the customer and the value to the company at the centre of the marketers’ task,
which must guide the deployment of ICT in the service delivery context.
Technology cannot be the tail that wags the dog of co-creation based value
maximisation in a service oriented economy.
Conclusion
Currently companies’ use of ICT as part of their service proposition is too often
driven by their technological ability or their economic desire for increased
productivity rather than by a more holistic, customer-centric view of how ICT
can and should add value to the customer relationship. Companies are letting
the technological tail wag the dog. Rather than focusing on what they need to
provide customer relational value they are racing towards ICT parity at the risk
of damaging their customer relationships and automating some of the most
important aspects of the organisations relationships with their customers.
Introducing ICT into relationships without a clear understanding and a
modelling of the likely effect, driven by ‘me too’ thinking is a recipe for damaged
relationships and arms length dealing with valuable customers who can make
the difference between success and failure. The outcome of the changes
emerging now as companies rush to introduce ICT across a range of boundary
spanning customer interfaces, may result in the long term damage to core
customer relationships. Only those companies who can successfully deploy ICT
in service innovation and delivery with a customer centric focus will be able to
maximise the relational value and will be leading the continued rise of the
service-based economy of the future.
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Appendix 1
Appendix 1: MarkITing: A Framework for ICTs:
The information and interactions dimensions
Information
(Research, Analysis and Planning)
Interactions
(Communications, Connections and Collaborations)
Analysis and Planning
Communications
Marketing planning systems
Internet
Performance tracking software
- Website design software: Photoshop
Executive support systems
-Website security
Decision support systems
-Interactive website applications
ERP (Enterprise Resource Planning)
-Ecommerce applications
Knowledge Management Systems
Intranets
Pricing software
Extranets
Project Management Software
Electronic data interchange (EDI)
Promotion Tracking software
Email
Media Spend analysis packages
Video conferencing
Logistics Systems
Call centre
Geographical Information Systems
CATI – computer-aided telephone interviewing
Customer Profitability analysis
Automatic Call Distribution
PRISM Clusters - databases
Computer telephony integration
Forecasting Software
Mobile communication devices
Marketing modelling
Instant Messaging
Information systems (SAP, PeopleSoft and i2)
Tracking Devices – Blue Tooth
Databases
SMS – simple messaging service
Centralised customer database
Facsimile communications
-Integrated with sales
Electronic markets
-Integrated with call centre
Help lines
-Integrated with internet
Voice Mail
-integrated with point of sale
Spam blocking systems
Data consolidation and display
Voice activated/recognition software
Data mining
Computer links with suppliers
Data warehousing
Computer links with customers
Data Profiling
Web Casting
Data Visualisation and Analysis Packages
Web meetings: WebEx
GQL – Graphical Query Language
Digital Imaging Software
SQL
Self-Service Technologies
Research
Integrated TV and Internet - TIVO
Internet
Internet Technology
Marketing Information System
ATM,
Data Analysis Packages
Automated Vending machines
Geographic Information Systems
Hand held Scanners
Demographic online systems
Biometrics
Internet Survey – design and application
Mobile phones
Online mailing lists
Blue Tooth Technologies
Nielsen Information database
Monitoring devices
Web Analytical Technologies
Customisation software
Website Performance and Activity tracking
Personalisation software
Monitoring and Tracking Software
Sales Related
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Searchable Databases
Customer relationship management
Customer Relationship Management
Sales force automation packages
CRM Software
Mobile phones
Customised front office/back office systems
Laptops
Marketing Evaluation Software
Telemarketing
Contact Management Software
Customised sales force systems
Personalisation Technologies
Point of sale information systems
Customisation Technologies
Customised Customer Applications
Retailing System
Access databases
Electronic Point of Sale
Sales Reporting Software
Planogram, Spaceman Category Management
Supply Chain Management
Personalisation/customisations
Supply Chain Management Software (SCM)
Bar codes - scanning
Automated Production
New Product Development
Internet marketplace Emarketplace/Ehub
Product Development and Design software
Inventory management software
Simulation technologies
Material planning and supply software
Idea generation tool: Idea Garden -
Electronic Data Interchange
Imaginatik’s Idea Central
QR/ECR (Efficient Customer Response software
Statistical tools
Eprocurement systems
CAD Computer Aided Design
Online purchasing transactions
Others
RFID (Radio Frequency Identification Devices)
Interactive Products
Training and Educational Software
Biometric
Voice Recognition Software
Blue tooth technologies
General Underlying and Platform Technologies
Hardware: Personal Computers, Networked Computers, Main Frame, Laptops, Personal Palm Computers, CD
ROM/DVD, Mobile Phones. Digital Assistants.
Office Packages: Word, PowerPoint, Excel
Internal Communications Groupware Systems Lotus Notes, Wide/local area networks – Wan/LAN
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